01—Abstract
Summary
Summary of the 8-K filed January 25, 2024. Cited figures are marked; the original filing is the authoritative source.
Xcel Energy (XEL) reported fourth-quarter and full-year 2023 results on January 25, 2024.
GAAP diluted EPS for 2023 was $3.21a, versus $3.17 in 2022, and ongoing diluted EPS was $3.35, flat-to-up 5.7% year over year. Ongoing EPS excludes a $35 million (about $0.05 per share) loss on the Comanche Unit 3 litigation and $72 million (about $0.09 per share) of workforce reduction expenses recorded in Q4. Q4 GAAP EPS was $0.74 and ongoing Q4 EPS was $0.83, versus $0.69 in the prior-year quarter.
Revenue fell to $14.2 billionb from $15.3 billion, mainly because natural gas and electric fuel pass-through costs declined, while electric margin rose modestly to $7.17 billion and natural gas margin rose to $1.19 billion. Management reaffirmed 2024 ongoing EPS guidance of $3.50 to $3.60 and reiterated long-term objectives of 5% to 7% EPS growth and 5% to 7% annual dividend increases. The filing also lays out a large capital plan.
Base capital expenditures are forecast at $39.0 billionc for 2024 through 2028, with the largest share at PSCo ($19.2 billion) and most of the renewables spending in 2025. The plan is funded by about $22.0 billion of cash from operations, $13.0 billion of new debt, and $4.0 billion of equity, and an additional roughly $5 billion of potential renewable additions is not in the base plan. Investors should weigh the heavy reliance on debt and equity issuance against regulatory outcomes and cost recovery.
The most significant risk disclosed is the Marshall Fire litigation against PSCo. Plaintiffs allege PSCo's power lines caused the fire, and management says damages could exceed roughly $500 milliond of insurance coverage and could have a material adverse effect, but it cannot estimate a loss range.
Several regulatory items also bear on 2024 earnings: the PSCo Colorado resource plan approved at 5,835 MW, the SPS Texas rate case settlement pending a PUCT decision in Q1 2024, and multiple NSP-Minnesota and NSP-Wisconsin rate cases with interim or implemented rates effective January 1, 2024. Credit ratings are Baa1/BBB+/BBB+ at the holding company, and total liquidity across the group is about $2.4 billion.
02—Key points
Key Highlights
- 2023 GAAP diluted EPS of $3.21 (up from $3.17) and ongoing diluted EPS of $3.35 (up from $3.17), marking the 19th consecutive year of meeting earnings guidance.
- Q4 2023 GAAP EPS of $0.74 and ongoing EPS of $0.83, versus $0.69 in Q4 2022, with the workforce reduction ($72M, about $0.09/share) excluded from ongoing results.
- 2024 ongoing EPS guidance of $3.50 to $3.60 reaffirmed, assuming constructive rate case outcomes, normal weather, 2% to 3% weather-normalized electric sales growth, and O&M growth of 1% to 2%.
- Base capital plan of $39.0B for 2024 to 2028, funded by roughly $22.0B of operating cash flow, $13.0B of new debt, and $4.0B of equity, with about $5B of potential additional renewables not yet in the plan.
- Marshall Fire litigation against PSCo is a material contingent liability; damages could exceed roughly $500M of insurance coverage, and no loss range can be estimated.
- Full-year operating revenue declined 7.2% to $14.2B, mainly from lower fuel and natural gas pass-through costs, while electric margin rose to $7.17B and natural gas margin rose to $1.19B.
- Long-term objectives of 5% to 7% EPS growth off the $3.35 base and 5% to 7% annual dividend growth, with a 50% to 60% payout ratio target.
03—Questions
Frequently Asked Questions
Did Xcel Energy meet its 2023 earnings expectations, and how did it perform on an adjusted basis?
Yes. Xcel reported 2023 GAAP diluted EPS of $3.21 and ongoing diluted EPS of $3.35, which excludes a $0.05 per share Comanche Unit 3 litigation loss and $0.09 per share of workforce reduction costs. Management says this is the 19th consecutive year it has met its earnings guidance.
What is the 2024 earnings outlook?
Xcel reaffirmed 2024 ongoing EPS guidance of $3.50 to $3.60, which implies roughly 4.5% to 7.5% growth from the $3.35 ongoing base. The guidance assumes constructive outcomes in pending rate cases, normal weather, and continued sales growth, and it excludes unforeseen adjustments.
What is the biggest risk disclosed in the filing?
The Marshall Fire litigation is the most significant contingent risk. Plaintiffs allege PSCo's power lines started the December 2021 fire, which the filing says caused more than $2 billion in property losses. Xcel says damages could exceed its roughly $500 million insurance coverage and have a material adverse effect, but it cannot estimate a loss range, and PSCo disputes causation.
How will Xcel fund its large capital expenditure program?
Over 2024 to 2028, Xcel plans $39.0B of base capex funded by about $22.0B of cash from operations, $13.0B of new debt, and $4.0B of equity, including DRIP and benefit plan issuance and other equity. The company expects to finance any additional renewables at about 40% equity and 60% debt. Investors should note the reliance on external capital, which increases dependence on credit ratings and the cost of capital.
Why did revenue decline even though earnings grew?
Total operating revenue fell about 7% to $14.2B, mainly because natural gas revenues dropped and electric fuel and purchased power costs declined. Those pass-through costs are recovered from customers and do not significantly affect earnings. Electric margin rose to $7.17B and natural gas margin to $1.19B, which better reflects underlying profitability.
04—Continue